There is a trending stock and then there is a random moving stock. Bharti Airtel stock raised enormous hope when it rallied like crazy before the covid pandemic but the price action move in 2020 has been completely disappointing. Traders don’t like stocks that give mixed signals and do not have clear trends.
Bharti Airtel Case Study
Bharti stock stunned everyone with its stock price performance [400 levels to 560 levels] during precovid time [Nov 2019-Feb 2020].
Source: Chartalert.com
Whenever a stock rallies like this, it becomes a buy on the dip candidate. So when covid sell-off happened this became the must buy stock around March end 2020.
Here’s how the stock navigated in 2020:
Source: Chartalert.com
Bharti Airtel took support at 400-420 band. I recommended the stock as Must buy on April 03 2020 when it was trading at 200 dma (Point 1) in the above chart. The stock rallied to 600+ and a new high. It turned out to be a great trade, but the journey was not over. A new high always creates excitement but then just when the stock did that, promoters decided to sell some stock and it created an upside resistance for the stock. The stock then traded sideways and with digitization theme in the background, it was still construed as bullish. But then the stock broke down and tumbled to 200 dma again (Point 3). It was another place I turned extremely bullish and recommended again. The stock bounced too but only to stall at 50 dma and sell-off.
When a stock does not do what you anticipate, then you should exit. Bharti was an exit post its breakdown below 200 dma. The stock during the middle of a strong bull market tumbled back to 400 levels without any reason. It was like just to teach a lesson on what happens when you don’t pay attention to prices.
The stock was back to the same level as in March [Point 4]. And then for no good reason, the stock made a strong comeback from point of support, and first, it stalled at 50 dma and then climbed past it. The stock has now reclaimed 200 dma too. What’s the road ahead? Well, nobody knows. Price Action wise, the stock is a buy on declines near 460-490 band with a hope that sooner than later, it will climb back to 600 levels. But will it happen – who knows? It all depends on the overall market condition.
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Fundamentals don’t drive stock prices.
How people perceive those fundamentals drive stock prices.
As a market participant/trader, keep an eye on how the market views the fundamentals than being obsessed with your own version of fundamentals. It means look at the price action and it tells you without bias what the market thinks about the stock. Once you read the price action, go and find the reason why the market has such a view on the stock, and be aligned with it.
This is the level one mind training every individual requires to be in sync with market thinking. This is the real fundamental of Investing. I call it Science of Stock Price Action
If price action fascinates you – then Science of Stock Price Action is a great place to start.
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purposes. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers